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Is affiliate marketing a pyramid scheme? Here’s what you need to know

is affiliate marketing a pyramid scheme - what you need to know

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Everybody would love a passive form way to earn money. Who wouldn’t want to live a little easier, leave that soul-crushing job, or finally chase your passions with a bit of a safety net.

Affiliate marketing allows people to chase those dreams, but to some, that is precisely what it sounds like, a dream that is too good to be true. This plays a significant role in why many people may think affiliate marketing is just a pyramid scheme.

The truth is that affiliate marketing is as good as it sounds! It’s not a dream, a scam, or some shady multi-level marketing practice. Not only that, but it is unequivocally not a pyramid scheme. In the following article, we will go over how they are entirely different.

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How is affiliate marketing different from pyramid schemes?

Before we can cover how an affiliate marketing program is not a pyramid scheme, we need to cover what a pyramid scheme is. Pyramid schemes are multi-level marketing programs where the involved parties are required to recruit others to the cause and gain income from those subscribers.

Affiliate marketers do not receive compensation for recruiting anyone to sell the product. Furthermore, in affiliate marketing, an affiliate marketer generally does not pay to promote the products or services they choose to promote. Instead, they simply earn a commission from promoting products and services, which they can hand-pick.

What is an affiliate marketing business?

An affiliate marketing business is usually an independent online business that specializes in promoting companies, services, and products, but they can form part of affiliate networks. Affiliate marketing businesses generate profits by earning commissions from the projects they decide to take on.

As you can imagine, affiliate marketing businesses are not mega-corporations with hundreds and thousands of employees. Think of your favorite YouTuber doing an ad read or having an Amazon link. These are some of the most well-known forms of affiliate marketing.

It’s probably worth noting that not every ad or sponsored content you see from such an influencer is necessarily an affiliate program. Affiliate marketing is performance-based (that is, the influencer promoting the product only gets paid if a sale occurs). Many influencer won’t accept that kind of deal, and will promote a product with a separate set of terms between themselves and the business who looking for promotion.


What is an affiliate program or affiliate marketing program?

Affiliate programs are individual instances of affiliate marketing. In plain English, that means a company could run multiple affiliate programs at once. This also implies that affiliate marketers can simultaneously do many different affiliate marketing programs.

 Take Amazon, for example, which could have specific affiliate programs for tech-based products that they share with tech bloggers and content creators and a different affiliate program for household appliance purchases made through another link that is shared with lifestyle Instagram accounts.

Likewise, one affiliate marketer specializing in health and fitness can have multiple affiliate programs on their page that links to a healthy meal plan business on one post and another that links to a juice company.

What are affiliate marketers?

The short answer is that affiliate marketers are the people working for or who own affiliate marketing businesses and earning the commission generated by the sales in a legitimate way. But we aren’t here for short easy answers, are we? 

Affiliate marketers can take many shapes and forms. Some specialize in writing blogs and articles. Others are influencers that drive sales from their Twitter and Instagram posts. Perhaps the most well-known form of affiliate marketers is YouTubers and Tik Tokers, who use affiliate marketing as a secondary income to help diversify revenue streams passed just the monetization they earn from video views.


The pros and cons of affiliate marketing

Now that we have established that affiliate marketing is not a scam or anything to be afraid of and we have covered what exactly affiliate marketing and affiliate marketing programs are, we need to go over what makes affiliate marketing so amazing and what pitfalls there may be.

The pros of affiliate marketing

As with anything in life, there are good and bad aspects to things. Affiliate marketing is no different. So let’s go over what makes affiliate marketing a great choice to bring in a passive source of income.

There aren’t any high start-up costs

With other start-ups, the expenses of getting started can be rather large. For example, hiring people, renting offices, and getting the tools or resources are always costly. However, With affiliate marketing, all you need to start is a PC or laptop and an internet connection. 

If you are looking to get into affiliate marketing full-time, you will benefit from starting a website and a domain that adds to your start-up costs, but these are not a must to be successful and can be added later. 

No real ongoing costs to eat away at profits

This point is in the same vein as the previous one but slightly different. With other businesses, you will have running costs such as product storage costs, building rentals, and employee salaries that will diminish your hard-earned money. Whereas with affiliate marketing, your only costs are your ISP, electricity, domain, and hosting fees. 

If you want, you can rent a desk at a co-working space if you miss the office experience or hire an assistant to help you book affiliate programs. However, these costs are unnecessary as you can do affiliate marketing on your own and from home!


You don’t have to stick your neck out

Have you heard of no risk, no reward? Well, affiliate marketing laughs in the face of that idiom. You can start doing affiliate marketing and making money online without leaving the safety of your current job or taking on any lifelong debt.

As stated in the previous points, all you need is a computer, an internet connection, and some free time to do the work. No significant risks need to be taken, just some free time and dedication to your goals. Not to mention it won’t take hours and days of effort either, but more on that later. 

You do not need to be an expert

No need to take a marketing masterclass before becoming an affiliate marketer. Affiliate marketing is one of the few professions where learning on the job is the best way to learn. This is also because not all techniques work the same for all affiliates.

You can experiment with organic and paid affiliate programs, as well as try many other strategies. The point is to experiment with them, learn what works for you and optimize it for the next program you take on. This is not to say that any online marketing experience would hurt your chances of success, just that they are not required.

A passive income business model

Another positive point to starting an affiliate business is that it generates a passive income.  That is to say; you do not have to actively chase leads and sales.

Once you have connected your affiliate link to your choice of content, you will earn profit from every person who clicks on the affiliate link and purchase the service or product.


Flexible work hours

As we alluded to before, one of the other most attractive reasons to pursue a career in affiliate marketing is the flexible work hours. This is perfect for someone who is looking to start their affiliate business as a second income or who is looking to have it as a secondary aspect of an existing business.

As you will be a freelance based worker, your actual work hours are up to you. Are you a night owl and do more work when the rest of the world is asleep? Perhaps you are a late riser and work best during the afternoon hours? Neither is a problem as an affiliate marketer. You dictate your work hours and business practices.

The cons of affiliate marketing

It’s not all sunshine and rainbows being an affiliate marketing agency. As with all things, there are pitfalls and less-than-perfect situations you could get into. It is best to know what the dark side has to offer before diving in head first.

No career is perfect. All careers and businesses have negative points that the general public isn’t aware of. Let’s go over the most common pitfalls affiliates have come across in their adventures of promoting and marketing on the world wide web.

You don’t have control over the affiliate marketing programs

The products and services you choose to promote through your affiliate business will be products or services owned and created by other companies. This means you will not be able to control some crucial aspects of an affiliate program.

Things like how much commission you will get paid or the tone and themes being used in the affiliate media are all up to the merchant. You will have to respect their terms and conditions if you desire to be an affiliate of a specific brand, company, or service. 

Competition can be stiff

Depending on the chosen niche, competition can be fierce in affiliate marketing. For all the reasons we listed above and many more, it is easy for people to get into affiliate marketing and try their hand at it for a while.

However, this is the first mistake. Anything worth doing is going to have some sort of challenge to it. Yes, affiliate marketing can be a passive source of income, but this does not mean that work is involved. Success in any field is derived from hard work and, most of all, perseverance. Being a successful affiliate marketer is no different.

You can’t rely on repeat customers

The very nature of affiliate marketing means driving new sales to a site or online business. If there are any returning customers, they will return directly to the merchant site, not your unique affiliate link.

 However, there are affiliate programs that do provide recurring commissions and licenses, such as in the software as a service market.

Passive revenue does not mean guaranteed revenue

One of the most significant advantages of affiliate marketing is that there is no earning limit, as most affiliate programs are performance-based. However, this does mean that you only get paid for sales that have gone through your affiliate links.

It is possible but extremely unlikely that you will make zero revenue, so the best thing to do is maximize your opportunity and learn from every program what works and doesn’t work and adapt from there.

The freelance lifestyle isn’t for the faint of heart

The freelance lifestyle can be challenging for those who are predisposed to mental health issues as it can feel lonely and stagnant at times, so it’s good to form some healthy habits to keep those at bay.

A fantastic way to keep the gremlins at bay is to find a workspace outside and go there every day, or perhaps scout around for coffee shops in your city that caters to remorse workers and use one that suits you best. Just do not close yourself off from your friends and family, and keep them updated on your well-being.


Hopefully, now you can tell that affiliate marketing has nothing in common with pyramid schemes or other multi-level marketing scams. Affiliate marketing is a legitimate business model that you can start and build up from the comfort of your home with minimal risk or investment. At the same time, pyramid schemes require you to invest as much capital as possible and recruit others to fund you. Not to mention that pyramid schemes are highly illegal.

If you have a reliable internet connection or know a coffee shop with one, all you need is determination, some free time, and a laptop to start affiliate marketing and making money online in a legitimate way and leave that soul-crushing job or help you fund your dreams.

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